Oil prices sank on Monday by about three per cent after United States (U.S.) President Donald Trump told the Organisation of Petroleum Exporting Countries (OPEC) prices were on the high side.
WTI Crude was down 2.58 per cent at $55.78, and Brent Crude was trading down 2.39 per cent at $65.64.
But foremost investment bank, Goldman Sachs, said Brent crude oil prices could reach between $70 and $75 a barrel in the near term, with an upside potential of exceeding the $67.50 a barrel forecast.
Nigeria’s budget 2019 has $60 per barrel as benchmark.
As the oil market continues to tighten significantly, sustained rise in Africa’s largest oil producer is good as it will make cash available to fund the heavy capital component of the budget easy.
A member of OPEC, President Muhammadu Buhari had said the country would offer to cut daily production to guarantee good price.
The outlook for the oil market through the end of June this year is modestly bullish, Reuters quoted the bank as saying in a research note yesterday.
Yet, Goldman Sachs sees a possible Brent Crude jump into the $70s as fleeting, because United States (U.S.) oil exports and a possible easing of OPEC’s production cuts in the second half of the year could cap the bullish sentiment.
“The oil market will likely continue to tighten significantly this March and April,” Bloomberg quoted Goldman’s note as saying.
OPEC’s cuts and possible acceleration of Venezuela’s supply disruptions will support oil prices in the coming months, Goldman Sachs said.
“While prices could easily trade in a $70-$75 a barrel trading range, we believe such an environment would likely prove fleeting,” said Goldman’s analysts, who kept their end-of-the-year Brent Crude forecast at $60 a barrel.
Last week, oil prices hit fresh highs this year, driven by optimism that the U.S. and China will forge a trade deal and that OPEC’s resolve to rebalance the market will outweigh soaring U.S. oil production.
At the beginning of this week, oil prices fell somewhat after President Trump, once again, asked OPEC not to take too much crude off the markets.
Earlier this month, Goldman Sachs said that it expected Brent Crude prices to hit $67.50 a barrel in the second quarter of the year as ‘shock and awe’ production cuts by OPEC and increased supply disruptions couple with healthy demand and seasonal inventory declines to drive prices higher.